Coming Next: Real-Time Bartering Of Video Ads

The growth of online video traffic over the last five years has spurred publishers to monetize their streams and advertisers to distribute their brand messaging on this medium. Video ad delivery is inherently more difficult to distribute than display ads, and until now, limiting the avenues available for video ad sources and video inventory owners to direct relationships and static pricing models.

IAB standards will help streamline the delivery of video ads, which in time will eliminate the technical distribution hurdles that are nonexistent in display. In-video ad delivery will become more efficient, increasing the ad supply for publishers and inventory available to advertisers. This will set the stagefor a marketplace that demands bartering between buyers and sellers.

To bid or to sell

While the difference between an advertiser bidding on inventory and a publisher selling placements on content is subtle, the technical implications are significant.

Rather than irrational advertiser-bidding on inventory, which can result in wasted number crunching on both ends and unused transactions across parties, the inventory owner would make an ad request with a floor-selling amount. The ad source could immediately refuse the request, halting the back-and-forth. This method also gives control to the publisher to set a floor price and offer inventory on the spot, allowing the advertiser to buy based on the various targeting and optimization aspects associated with the inventory.

For supply and demand to succeed in any marketplace, the components of a direct seller-to-buyer relationship must be part of real-time bidding, as well. Contextual signals, performance indicators and targeting data are necessary for the buyer to make an educated decision on the cost of inventory. When these three factors are available in both scenarios, those parties that can effectively barter on the exchange of inventory for ad space will stand to profit.

How to price excess inventory

Advertising success is highly affected by seasonality, and publisher expectations and advertiser budgets are often misaligned. This creates an excess of unsold inventory and campaigns, which leave money on the table. While periodic fluctuations of campaign availability will always be a challenge, the needs of publishers and the desires of advertisers can find a balance.

Currently, video inventory buys from ad networks or advertisers are done through contracts with static prices. A dynamic method of acquiring inventory by ways of real-time bartering would allow the advertiser to pay more for placements that are part of valuable inventory, while allowing the publisher to release currently withheld inventory of value in exchange for a higher price. Releasing wider ranges of video inventory to advertisers at higher rates will yield performance benefits for the campaign while rewarding the video content owner appropriately. This gives buyers transparency into what they are purchasing: an emerging requirement from the demand side of the transaction.

Who stands to benefit

Members of the online video ecosystem have a great opportunity to benefit from these initiatives. Publishers who can intelligently price their inventory will see financial gains. Those on the demand side who can quickly accept a price using all targeting, performance and budgeting data at their fingertips can benefit from the increased ad supply and quality of the inventory, respectively. Furthermore, the target audience of the ads will see more relevant and appealing ads, and won't often be overexposed to a particular ad. The benefits to these three parties are a boon to the advertising world as a whole.

Real-time exchange of ads/inventory will allow for increased selectivity of placements on important segments, which will lead to improved performance. This will also make extinct or devalue most poorly performing inventory and benefit the traffic that generates best results for the buyer.

Perhaps the greatest benefit of real-time transactions in the exchange of video ads is the increase in transparency. Buyers gain visibility into the placements of their campaigns and can make decisions based on the factors surrounding video inventory, while publishers can reduce the common discrepancies involved with pricing and impression counting.

Future of real-time video ad bartering

Without sufficient video inventory or plentiful video ad campaigns, the benefit of real-time bartering on the exchange of video ads is negligible, but those two challenges are quickly becoming a thing of the past. In 2009, only 1% of display ads were exchanged through RTB. Real-time negotiation tactics are only beginning to see activity in the video ad world, but they stand to be a common part of the process.

No marketplace with a dearth of buyers or sellers will succeed, but as video content inventory grows and the demand for buying placements on that traffic increases, players will join the game. Real-time negotiation takes scale and infrastructure. And while there may not be sufficient scale in the near future, buyers and sellers both stand to benefit. Those who jump on board now are guaranteed to profit.

"Publishers who can intelligently price their inventory will see financial gains. Those on the demand side who can quickly accept a price using all targeting, performance and budgeting data at their fingertips can benefit from the increased ad supply and quality of the inventory, respectively. Furthermore, the target audience of the ads will see more relevant and appealing ads, and won't often be overexposed to a particular ad. The benefits to these three parties are a boon to the advertising world as a whole."

Jason - great article. Could not agree more, but one minor correction...a video ad exchange exists today it is called the adap.tv video marketplace and it launched to much fanfare on February 17: http://adage.com/digital/article?article_id=142122. Currently, we have over two dozen buyers and over 700 publishers in the market! Check it out at adap.tv

Mike Einstein from the Brothers Einstein , April 19, 2010 at 6:16 p.m.

Such utter foolishness. Not only is the media supply impossibly overabundant (and growing), it's all designed to accommodate a product - ads - that no one wants, relevant or otherwise, and everyone is equipped to avoid.

CPM deals for under a buck say it all. The reason it's so cheap is because it's worthless.

Toby, apologies -- there are indeed members of the ecosystem: Video ad exchanges (specificially Adap.tv) and Ad Mgmt Platforms (ex: LiveRail and Freewheel.tv) that are dipping their toes into initiatives that demand real-time bartering of for video inventory/video ads. Props to those of you that are breaking the ice here!